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David Williams is helping stoke the frenzy in technology stocks. The 45-year-old former Silicon Valley executive recently shelled out $500,000 for 25,000 shares of closely held social-gaming company Zynga Inc.

"Ten years ago, there was no possibility of buying into a company like Netscape" before it went public, said Mr. Williams, who sank about $2 million during the past year into shares of closely-held Zynga, Facebook Inc. and LinkedIn Corp. Those three firms now constitute 80% of his investment portfolio.

Darcy Padilla for The Wall Street Journal

David Williams, above in San Francisco has bought shares in Facebook, LinkedIn and Zynga.

In an echo of the era when day traders scrambled in and out of technology stocks during the 1990s, wealthy individual investors such as Mr. Williams are flocking to a new crop of Internet darlings, pushing the values of those companies sky high.

This time, though, the hottest stocks are privately held and don't yet trade on major exchanges such as the New York Stock Exchange or Nasdaq Stock Market. The volume of such trades is expected to hit $6.9 billion this year, up 50% from 2009, according to Nyppex Holdings LLC, which matches buyers and sellers of closely-held shares. Individual investors generate as much as 20% of the business, some brokers estimate.

It's easy to see why more and more investors are willing to overlook the risks that come with sinking money into private companies that don't disclose even basic financial details. LinkedIn plans to go public this week, with the Mountain View, Calif., social-networking firm on Tuesday raising its offer price to between $42 and $45 a share, up from a previous range of $32 to $35 apiece.

An IPO would deliver huge profits to investors who scooped up LinkedIn shares before the deal on private-company exchanges such as SharesPost Inc. and SecondMarket Holdings Inc. Other buyers get shares through single-company investment vehicles, which pool investor money to buy and hold shares of specific start-ups, while still others buy shares directly from former employees or advisors of those start-ups.

LinkedIn didn't respond to requests for comment.

The booming market faces a possible crackdown by the Securities and Exchange Commission, which is concerned about lack of transparency, thin trading volume and insider-trading risks. SEC officials also are considering whether to revise stock-offering rules in order to spur more buying and selling of private-company shares.

"There are now a lot of people at the baccarat table," said Marc Goldstein, 49, a San Francisco entrepreneur who has traded private-company shares. "It's getting more day-trader-ish, and I know I'm somewhat guilty of it."

Buyers of such stocks insist they aren't gambling or breaking any rules. Many of the investors are wealthy and want to hitch a ride on startups before they go public, just as venture-capital firms have done for decades. SEC rules require buyers and sellers of closely-held shares to have financial assets of at least $1 million or annual family income exceeding $300,000.

"I consider Facebook a safe [investment] vehicle," said Sizhao Yang, 28, a former Zynga executive who last year plowed more than $250,000 into a Facebook fund run by San Francisco-based EB Exchange Funds.

Mr. Yang, who recently helped launch a startup in Los Angeles, said the risks are small given Facebook's size and momentum. The social-networking company is worth about $70 billion, based on recent private transactions, up from $35 billion in late 2010.

Facebook is likely to start making financial disclosures or take steps to go public as soon as next year, under Securities and Exchange Commission regulations governing the number of shareholders in a private company.

A Facebook spokesman declined to comment.

Some closely-held companies have clamped down on the trades by exercising a "right of first refusal" on private-share sales. Even when a deal is reached to sell stock, companies typically can still buy back the shares within 30 days, giving them another form of veto power.

Mr. Williams, an executive at Internet search company Excite@Home Inc. before it filed for bankruptcy in 2001, now is an "angel" investor who puts small slugs of his own money into technology companies, nurturing them as they grow. He began buying private-company shares last year after deciding that established companies like Facebook would diversify his portfolio.

In February 2010, Mr. Williams bought 10,000 shares of LinkedIn at $18 apiece from a friend, whom he declined to identify.

That deal encouraged him to open an account with SharesPost, where he bid between $14 and $15 a share for 25,000 shares of Zynga. But the purchase collapsed when Zynga exercised its right of first refusal. Mr. Williams said he wasn't given an explanation.

In a statement, Zynga said that "secondary markets for privately held stock have added to the complexity of legal compliance, particularly where buyers and sellers may have asymmetrical information."

Determined to add to his portfolio, Mr. Williams turned to Larry Albukerk, the managing partner of EB Exchange. Mr. Albukerk referred Mr. Williams to a former Zynga adviser who wanted to unload 25,000 shares for between $16 and $18 each. The sale went through.

Since then, Mr. Williams has bought 35,000 Facebook shares, and acquired an additional 10,000 shares of LinkedIn for $21 apiece, in separate transactions. When LinkedIn goes public this week, his shares are likely to be worth some $450,000 more than he paid for them.

Still, if he can pull off one more purchase of Zynga shares, Mr. Williams plans to take a hiatus from private-company stock. "I kind of feel like values are getting fair," he said. "Some would argue insane."